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About Bahrain Despite the current price correction experienced by other Middle Eastern countries, Bahrain's real estate sector continues to surge. Property prices still surging in BahrainAs in the rest of the region, Bahrain’s property prices have skyrocketed. Property prices in Manama, the capital, have surged 600% over the past three years. In other parts of Bahrain, prices have climbed about 400%, according to developers. In Juffair, a prime south Manama residential district, the average selling price of an apartment is now around BHD830 (US$2,202) per sqm, up 66% from BHD500 (US$1,326) two years earlier. Higher oil revenues and foreign investments have pushed up Bahrain's purchasing power, stimulating housing demand. Liberal real estate laws, freedom from tax, and easy home financing have added to the real estate boom. Land prices have followed apartment prices up, soaring by around 120% annually since 2003. In June 2008, the average selling price of residential land was BHD402 (US$1,066) per sqm. On the supply side, the shortage of construction materials here as elsewhere in the Gulf, has intensified the escalation of property prices. In 2007 total property transactions rose 56% y-o-y to BHD1.37 (US$3.62) billion. Bahrainis accounted for 93% of the total, non-Bahrainis for the remaining 7%. Property prices surgeManama’s property prices are the highest in Bahrain. In Seef and Sanabis, on Manama’s northern coast, the average selling price of a freehold apartment is BHD1,050 (US$2,785) per sqm. In Seef’s Avare Tower, a 75 sq. m. one-bedroom apartment costs BHD85,000 (US$225,458); 120% up from BHD38,000 (US$100,793) in 2005. Similarly, the price of a 120 sqm two-bedroom apartment in Abraj Al-Lulu, another Seef freehold property development, has risen 88% over 3 years to BHD150,000 (US$397,868). Other Bahrain prices:
Manama’s land prices have also risen dramatically. Land prices in Sanabis have risen 300% over the past 3 years to BHD40 (US$106) per sq. ft. Similarly land prices in Seef have climbed 400% to an average of BHD275 (US$729) per sq. ft. Mortgage interest rates lowIn the first half of 2008, the Central Bank of Bahrain repeatedly cut key interest rates to maintain exchange rate stability (the Bahrain dinar is pegged to the US dollar at 1BHD = 2.65US$). Mortgage rates, however, have fallen less than other interest rates. In Q2 2008, mortgage interest rates stood at 8.42%, slightly down from 8.51% a year earlier. The mortgage market is growing rapidly, albeit from a low base. In Q1 2008, outstanding mortgage loans had grown 72% y-o-y, to BHD452 (US$1,198) million. At the end of 2007, total outstanding credits were around 5.1% of GDP, up from 3.9% of GDP a year earlier. To cap the banking sector’s exposure, the Central Bank of Bahrain (CBB) stepped in at end-2007 to limit the value of banks’ real estate financing to 25% of loan portfolio value. To make housing more available, in May 2008 the CBB raised the loan to value limit for residential mortgages from 70% to 90% of the total property value. Acute housing shortageBahrain has plentiful luxury residential properties, but a severe shortage of housing for low to middle-income groups. There are currently around 55,000 to 40,000 families registered with the Ministry of Works and Housing as having applied for either low-cost housing loans or state-provided accommodations. In addition, the rising number of expatriate workers has pushed up demand. Only half of the kingdom’s 1 million population were non-Bahrainis in 2007, according to Central Informatics Organisation. In 2001, there were 105,686 housing units in Bahrain, according to the latest population and housing census. Of this, 32,538 were in Manama. Rental market tightThe rental market is almost entirely foreign-driven, propelled by Bahrain’s rising expatriate workforce. In addition, many expats working in the Eastern Province of Saudi Arabia prefer to reside in the more liberal Bahrain. The presence of the American Navy also boosts the rental market. In Juffair, luxurious apartments cater to American soldiers and other wealthy foreigners. Rents have moved up swiftly. Despite an official ceiling on rent increases of 10% a year, landlords sometimes raise rentals by up to 40% annually. The average rent for a three-bedroom apartment in Manama was BHD781 (US2,072) per month in 2008, up 11.3% from BHD702 (US$1,862) per month in 2007, according to the UN International Civil Service Commission. Seef has the highest luxury rental rates. A two-bedroom apartment in Seef rents for around BHD1,000 (US$2,652). Rents for similar apartments in other areas range from BHD650 (US$1,724) to BHD800 (US$2,122). The construction boom continues. Real estate projects in Bahrain worth BHD3 (US$9) billion are currently under development. The government actually wants to accelerate the pace of construction to ease the housing crisis, and plans 15,000 new housing units between 2007 and 2010, and more funds for housing loans. Due to the Gulf-wide construction boom, the prices of building materials have skyrocketed. The cost of materials rose 30% in 2007, and a further 50% in the first half of 2008. Bahrain is experiencing a cement shortage, as Saudi Arabia has reduced its cement exports to the country from 50,000 tons per week to 25,000 tons per week. The cost pressures and the cement shortage cooled construction in 2007, with only 9,830 construction permits issued, 7% down on a year earlier. Alternative cement suppliers from Spain, Turkey and UAE are expected to step in. In addition, the launch of a Bahraini cement company worth around BHD0.75 (US$2) billion is planned by Gulf Finance House. Mega real estate projectsDespite all this, the demand for housing is expected to increase, as Bahrain becomes more accessible to other Gulf countries, with the completion of the King Fahd Causeway, which connects Bahrain to Saudi Arabia, and the soon-to-be-built Bahrain-Qatar Friendship Causeway. Major development projects:
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